The Employment Appeal Tribunal (EAT) has considered whether an employee was constructively unfairly dismissed when his employer threatened to impose a significant pay cut.
Mostyn v S and P Casuals Ltd UKEAT/0158/17
The employee, Mr Mostyn, was a sales executive whose sales figures fell substantially over a period of four years. His employer asked him to accept a substantial pay cut in his basic pay, from £45,000 to £25,000. Mr Mostyn objected to this proposal; his objection was treated as a grievance by his employer. After his grievance was rejected he resigned and brought a claim for constructive unfair dismissal, based principally on breach of the implied term of mutual trust and confidence.
Mr Mostyn’s claim was rejected by an employment tribunal. It held that the employer’s actions, viewed objectively, were likely to destroy or seriously damage the relationship of trust and confidence. However, the tribunal was satisfied that the employer had reasonable and proper cause for its actions (due to the employee’s dwindling sales figures over a long period of time). Even if the employee had been constructively dismissed, the tribunal held that it would have been fair by reason of capability and within the range of reasonable responses open to the employer. Mr Mostyn appealed.
The EAT upheld the appeal. The finding that the employer had ‘reasonable and proper cause’ to impose the pay cut was incorrect. No question of reasonableness could arise where the conduct of the employer amounted to a breach of the implied term of trust and confidence and also a breach of an express term in relation to salary. There could be no doubt that such a breach was repudiatory. The employee had been constructively and wrongfully dismissed.
This case establishes that an employer can never have a reasonable and proper cause for breaching the implied term of mutual trust and confidence, where the breach consists of the unilateral imposition of a significant pay cut on an employee. It is not a question of whether it is fair to change the terms of the contract, but whether the contract is broken in a sufficiently serious way. In this instance, it would have been better for the employer to follow a performance management procedure in an attempt to improve the individual’s performance, rather than seeking to deal with it by imposing a pay cut.